This is a troublesome time to be a start-up.
New entrants into the electrical car market are dealing with a slew of challenges, together with runaway inflation, provide chain hold-ups and Russia’s invasion of Ukraine.
Rivian Automotive (RIVN) – Get Rivian Automotive Inc. Report, which went public in November, is reportedly delaying supply of its long-awaited SUV, the R1S, by one to 9 months.
Navigating a Tight Supply Chain
Rivian didn’t instantly reply to a request for remark, however in a letter to clients posted on RivianBoards, the corporate stated that “we’ve continued to navigate a tight supply chain, we’ve had to reduce complexity wherever possible, including prioritizing certain build combinations over others.”
In addition, the corporate stated, “we continue to prioritize deliveries in locations where service infrastructure is in place so that we can provide the full ownership experience to Rivian owners from day one,” Rivian stated.
“My R1S Launch Edition moved from April-May 2022 to August-September 2022,” one buyer wrote. “Not as bad as I was expecting.”
“Was July-Sept now Oct December – ground hog day in these delay emails but falling into the trap thinking OK… This is legit final delay,” one other poster stated, referring to the 1993 movie starring Bill Murray.
Last month, Ford (F) – Get Ford Motor Company Report disclosed in a Securities and Exchange Commission doc that it bought Rivian inventory, a transfer that was seen as a blow to the upstart electrical car maker.
‘Bumps within the Road’
Ford, which held 102 million Rivian shares, bought 8 million of these Rivian shares on May 9, based on the submitting posted on May 10.
Earlier this month, DA Davidson analyst Michael Shlisky initiated protection of Rivian with an underperform score and $24 worth goal.
While the corporate’s pickup truck and SUV electrical automobiles are increased priced than typical mass-market fashions, the “high-performance and feature-rich vehicles may be able to justify the premium pricing,” Shlisky stated in a analysis observe.
Shlisky stated he “loved” the truck he examined, however the analyst was frightened that adverse headlines will outnumber the positives within the months to come back.
Like most electrical car startups, “there have been bumps in the road,” he stated.
In a June 6 regulatory submitting, the corporate shared a letter to shareholders from Rivian CEO RJ Scaringe, who stated that “since raising $13.7 billion of gross proceeds in our IPO last November, the capital markets have changed dramatically.”
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‘We Have Focused Our Roadmap’
“We have focused our roadmap to ensure that the $17 billion of cash we had on our balance sheet as of March 31, 2022 can support the 2025 launch and ramp of our R2 vehicle platform,” he stated.
In addition to Ford, Amazon (AMZN) – Get Amazon.com Inc. Report can be one other main shareholder in Rivian.
Scaringe stated in his letter that “our strong partnership with Amazon and its initial order of 100,000 vehicles enables us to work with one of the most sophisticated fleets in the world to demonstrate how electrification and connectivity fundamentally improve the operating costs for commercial fleets.”
“On the consumer side,” he stated, “the R1T and R1S establish the brand and lay the foundation for us to grow and expand our portfolio globally across different price points and form factors, the first of which will be our R2 platform.”
Scaringe instructed shareholders “the journey ahead won’t be easy,” and different EV startups are most likely having related emotions.
‘Difficult Territory’
Canoo (GOEV) – Get Canoo Inc. Report, one other EV start-up, lately warned that it runs the danger of working out of cash in coming months, stating “that there is substantial doubt about the company’s ability to continue as a going concern.”
More lately, Electric Last Mile Solutions (ELMS) introduced that it might file for chapter, saying “there were too many obstacles for us to overcome.”
So is there any cause to consider that EV start-ups are on the endangered species listing? Peter Wells, professor of enterprise and sustainability at Cardiff University, would not assume so.
“The automotive industry has long been difficult territory for new entrants to compete against the established advantages of the incumbent majors able to deploy vast economies of scale, strong brand recognition, and mature supply chain and distribution structures,” he stated.
Prior to the emergence of EV applied sciences, Wells added, “the industry had been continuing a process of global expansion of markets and, in parallel, consolidation of ownership – albeit mediated by governments.”
Exception That Proves the Rule?
Wells stated Tesla (TSLA) – Get Tesla Inc. Report has managed to disrupt this sample, “but is in danger of becoming the exception that proves the rule.”
“Tesla has some distinctive features that other new entrants have struggled to meet,” he stated, “notably a clear first-mover technological edge, the deployment of an infrastructure solution alongside the rollout of cars onto the market, substantial initial financial backing that enabled a ‘grow first, profit later’ strategy, deep levels of investment support from national and (US) state governments, and a charismatic CEO able to capture the public imagination and legitimize those ‘early adopters’.”
There are loads of different new entrants searching for to copy this story a technique or one other, Wells added, “but now the established incumbents have, to varying degrees, turned their considerable corporate resources to bringing EVs to market in scale.”
“Hence the window of opportunity for companies to leverage the EV moment seems to be closing pretty fast,” he stated. “It is not over for sure….However, I anticipate that new entrants will increasingly need ‘tech’ company backing with resources and technologies and different ways of reaching customers.”
Source: www.thestreet.com